Forward the Original Title ‘一个比特币价值20万美金？4种估值研究’

Recently, BTC has fluctuated downward, reaching around $56,000. In contrast, U.S. asset management firm VanEck predicted in July that BTC could reach $2.9 million by 2050—a staggering figure in comparison. So, what should the fair price of Bitcoin be? $0, $50,000, or $1 million—or even higher? In this article, Biteye explores four Bitcoin valuation methods to help you gain a more well-rounded understanding of Bitcoin’s value.

Bitcoin Valuation Methods

Traditional assets like stocks and bonds have well-established and effective valuation models. However, assessing Bitcoin’s value presents more challenges, as there’s currently no single valuation method that clearly outperforms others. Below are four commonly used Bitcoin valuation methods: the Production Cost Model, Stock-to-Flow Model, Metcalfe’s Law, and the AHR999 Hoarding Indicator.

• Production Cost Model: Mining consumes not only significant amounts of electricity but also other resources, so mining costs can be considered Bitcoin’s fundamental value.
• Stock-to-Flow Model: A higher stock-to-flow ratio typically indicates greater scarcity, which may drive Bitcoin’s price upward.
• Metcalfe’s Law: This theory emphasizes that the increase in network users has an exponential impact on network value.
• AHR999 Hoarding Indicator: Created by Weibo user ahr999, this indicator helps Bitcoin dollar-cost-averaging users make investment decisions by combining market timing strategies.

1. Production Cost Model

Unlike fiat currencies like the Euro or U.S. dollar, which are created with almost no production cost, Bitcoin is generated through a complex mining process. Thus, Bitcoin’s production cost primarily refers to the cost of mining.

In the long run, the cost of mining a Bitcoin is usually close to Bitcoin’s market price. Mining costs can be viewed as the price floor for Bitcoin, as historically, Bitcoin’s price has rarely stayed below the cost of production for long periods. This is partly due to the correlation between Bitcoin prices and the total computational power (hash rate) used for mining, as well as the competitive mining environment where less efficient miners are often forced out of operation. The chart below shows the average mining cost of Bitcoin:

(Data source: https://en.macromicro.me/charts/29435/bitcoin-production-total-cost)

As of September 2, 2024, the average cost to mine one Bitcoin is approximately $74,000, which represents Bitcoin’s current valuation based on the Production Cost Model.
Since Bitcoin’s current price is below this mining cost (as estimated by the Production Cost Model), one of two things is likely to happen soon: either the number of miners will decrease, or Bitcoin’s price will rise above the cost of mining.

2. Stock-to-Flow Model

The Stock-to-Flow Model (S2F) is a method commonly used to assess the value of commodities. Specifically, “stock” refers to the current total supply of an asset, while “flow” refers to the annual increase in supply.
The higher the stock-to-flow ratio, the scarcer the asset tends to be, as it would take longer to replenish the current supply. For example, if a commodity’s stock is 100 times its flow, it would take 100 years to replenish the current supply. In contrast, if the stock is only 10 times the flow, the asset is less scarce, as it would only take 10 years to replenish. Thus, the stock-to-flow model provides a simple and effective way to measure scarcity, which is a key factor influencing price.

Bitcoin’s Stock-to-Flow Ratio

As of August 2024, the circulating supply of Bitcoin (stock) is approximately 19.75 million BTC. Given that miners currently receive a reward of 3.125 BTC per block and one block is mined every 10 minutes, the annual flow of new Bitcoin is around 164,359 BTC. Therefore, Bitcoin’s stock-to-flow ratio is:
19,750,000 / 164,359 ≈ 120.1

This ratio suggests that, at the current growth rate (flow), it would take about 120 years to reach the current circulating supply (stock).

Let’s compare this with gold, the world’s most important reserve asset. According to the World Gold Council, in 2023, gold’s stock-to-flow ratio was:

209,000 / 3,500 ≈ 59.7

As mentioned earlier, a higher stock-to-flow ratio indicates greater scarcity. Thus, according to the Stock-to-Flow Model, Bitcoin is roughly twice as scarce as gold!
However, as of August 2024, gold’s total market value was about $16.8 trillion, while Bitcoin’s market value was only $1.1 trillion—just one-sixteenth of gold’s value.

(Data source: https://companiesmarketcap.com/assets-by-market-cap/)

According to the Stock-to-Flow Model, Bitcoin’s scarcity is twice that of gold. If we crudely assume Bitcoin’s market cap should be double that of gold, the result would be $33.6 trillion. This would value Bitcoin at an astounding $1.708 million—30.5 times its current price.

Of course, such calculations lack a firm basis since scarcity alone cannot fully account for value. As a more nuanced approach, we can refer to the “Bitcoin Stock-to-Flow Real-Time Chart,” which provides a more detailed valuation of Bitcoin. In the chart below, the yellow line represents the model’s estimated Bitcoin price, while the colorful line represents Bitcoin’s actual market price. It’s worth noting that since 2022, the model has started to deviate, with its predicted prices consistently exceeding Bitcoin’s real market price, for reference only.

According to the Bitcoin Stock-to-Flow Real-Time Chart, Bitcoin’s current valuation should be around $210,000.

(Data source: https://charts.bitbo.io/stock-to-flow/)

03 Metcalfe’s Law

Metcalfe’s Law is primarily used to evaluate the value of communication networks but can also be applied to blockchain technology, including Bitcoin.
According to this theory, the more users a network or technology has, the greater its appeal and value, with the value of the network growing proportionally to the square of the number of users. For example, if a network has 10 users, the network’s value is proportional to the square of its user base: 10 10 = 100. If the number of users increases to 20, the network’s value rises to 20 20 = 400. This demonstrates that the value of a network grows exponentially with each new user, rather than linearly.
As of September 4, 2024, the number of Bitcoin addresses has doubled over the past five years, growing from approximately 26 million to 54 million, representing a 2.076x increase. Based on Metcalfe’s Law, Bitcoin’s market value should have increased proportionally to the square of this growth, implying that Bitcoin’s market cap should be 4.3 times what it was five years ago. At this rate, a single Bitcoin is estimated to be worth around $41,000.

04 AHR999 HODLing Indicator

This indicator reflects the short-term return on dollar-cost averaging (DCA) investments in Bitcoin and measures the deviation between Bitcoin’s price and its expected valuation.

• When the AHR999 index is below 0.45, it signals a buying opportunity.
• When the AHR999 index is between 0.45 and 1.2, it suggests that DCA is appropriate.
• When the AHR999 index is above 1.2, the price is considered high, and no action is recommended.

In the long run, Bitcoin’s price shows a positive correlation with block height. The advantage of using DCA allows users to control their average purchase cost, typically keeping it below Bitcoin’s actual price.

The AHR999 indicator is calculated as:
AHR999 Index = (Bitcoin Price / 200-Day DCA Cost) * (Bitcoin Price / Exponential Growth Valuation)

As of September 4, with Bitcoin’s price at $57,481.9, the calculation yields:
0.6 = (57,481.9 / 63,570.07) * (57,481.9 / Exponential Growth Valuation)
Thus, the exponential growth valuation for BTC is approximately $86,628.

Although this valuation fluctuates daily, it suggests that Bitcoin’s estimated price is consistently above $80,000.

05 Conclusion

Each valuation method provides distinct insights, contributing to a broader perspective on Bitcoin’s value. However, it will take time to assess how well these models hold up against actual price trends, and they should not be used as the sole basis for investment decisions.

💡 Risk Warning: Cryptocurrencies carry significant risks. The above content is for informational purposes only and does not constitute investment advice. Readers are encouraged to comply with local laws and regulations.

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1. This article is reprinted from [Biteye]. Forward the Original Title‘一个比特币价值20万美金？4种估值研究’. All copyrights belong to the original author [Biteye]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
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